On January 1, Skills Company Purchased as a Short-Term Investment $\quad$

question 113

Short Answer

On January 1, Skills Company purchased as a short-term investment a $1,000, 6% bond for $1,000. The bond pays interest on January 1. The bond is sold on July 1 for $1,200 plus accrued interest. Interest has not been accrued since the last interest payment date. What is the entry to record the cash proceeds at the time the bond is sold? a. Cash. $\quad$$\quad$ 1,200
$\quad$ Debt Investments $\quad$$\quad$ 1,200
b. Cash $\quad$$\quad$ 1,230
$\quad$ Debt Investments $\quad$$\quad$ 1,000
$\quad$ Gain on Sale of Debt Investments $\quad$$\quad$ 200
$\quad$ Interest Revenue $\quad$$\quad$ 30
c. Cash $\quad$$\quad$ 1,230
$\quad$ Debt Investments $\quad$$\quad$ 1,200
$\quad$ Interest Revenue $\quad$$\quad$ 30
d. Cash $\quad$$\quad$ 1,200
$\quad$ Debt Investments $\quad$$\quad$ 1,000
$\quad$ Gain on Sale of Debt Investments $\quad$$\quad$ 200

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Definitions:

Mutually Beneficial Trade

Trade agreements between parties that provide gains or advantages to all involved, enhancing each party's welfare.

Relative Cheaper

The comparison of the cost of one product or service to another, indicating that the former is less expensive.

Labor-Intensive

Describing a process or industry that requires a large amount of labor to produce its goods or services.

Comparative Advantage

The ability of a country or firm to produce a particular good or service at a lower opportunity cost than its competitors, which enhances efficiency in international trade.